Century Aluminum Q1 2023 Earnings Call Transcript

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May 8, 2023

There are 8 speakers on the call.

Operator

Afternoon. Thank you for attending today's Century Aluminum Company First Quarter 2023 Earnings Conference Call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to queue for a question on today's call, You can do so by dialing star 1. I would now like to pass the conference over to your host, Peter Trpkovski, Vice President, Finance and Investor Relations with Century Aluminum.

Operator

You may proceed.

Speaker 1

Thank you, operator. Good afternoon, everyone, and welcome to the conference call. I'm joined here today by Jesse Urie, Century's President and Chief Executive Officer Jerry Bialik, Executive Vice President and Chief Financial Officer and Shelley Harrison, Senior Vice President of Finance and Treasurer. After our prepared comments, we'll take your questions. As a reminder, today's presentation is available on our website at www dotcenturyaluminum.com.

Speaker 1

We use our website as a means of disclosing material information about the company and for complying with Regulation FD. Turning to Slide 1, contained in today's discussion. And with that, I'll hand the

Speaker 2

call to Jesse. Thanks, Pete, and thanks to everyone for joining. I'll start today by quickly reviewing our strong Q1 financial performance before turning to a brief summary of market conditions. Jerry will then take you through the financial results, and I'll finish with a discussion of our exciting new acquisition of a controlling interest in the Jamelco Aluminum Refinery and Bauxite Mines. Turning to Slide 3, market conditions for aluminum improved in the Q1 with both LME prices and regional premiums increasing from Q4 levels, driven by further supply side reductions in Europe and China.

Speaker 2

At the same time, input costs largely decreased quarter over quarter with U. S. Power prices falling most significantly. These improving market conditions paired with strong operating results drove Q1 adjusted EBITDA of $24,000,000 which is an improvement of approximately $36,000,000 over Q4. These good results were enabled by a tremendous effort by our operators across our locations.

Speaker 2

Safe and stable operations are a core requirement for Success at Century, and I'd like to commend all of my colleagues for the excellent operating performance they delivered in Q1. This begins 1st and foremost with health and safety, which is our most important priority here at Sentry. While we continue to strive towards Our ultimate goal of an injury free environment, I'm pleased to report a continued reduction in total recordable incidents from 2021 levels when we first implemented our new safety initiatives. We still have room for improvement and will remain dedicated towards reaching our ultimate goal. Finally, I'd like to welcome all of our new colleagues at Jamalco to the Century team.

Speaker 2

On May 2, we closed our acquisition of a 55% stake in the Jamalco Alumina Refinery and Bauxite Mines located in Clarendon, Jamaica, where we now become the operating partner. Century has long been one of the largest customers of Jomelco due to the high quality of the alumina that it produces and its strategic location in close proximity We are very pleased to add this excellent facility to the Century portfolio and to reduce our short position in bauxite and alumina to more closely match our smelter capacity. I'll return to Jamalco at the end of my remarks To further discuss the strategic rationale for this transaction and what to expect from Jamelco going forward. Turning to the market environment on Page 4, you can see the global supply and demand were roughly balanced as we entered the 2nd quarter, with additional smelter curtailments in Europe and Yunnan offsetting restarts elsewhere in China. In Europe, 2 additional smelters announced curtailments in Q1 due to continued high energy prices.

Speaker 2

In total, 1,200,000 tons of capacity has now been curtailed in Europe since the energy crisis began, representing over 50% of the total EU capacity. As you can see from the graph on the bottom right of Page 5, EU Energy prices are expected to increase further from here, and we therefore see risk of an additional 250,000 to 500,000 tons of European curtailments over the next 12 months. We do not anticipate any significant restarts during this time period As Ford Energy prices above $150 per megawatt hour remain well above levels needed for economic restarts. In China, continued low reservoir levels in Yunnan drove an additional 600,000 metric tons of curtailments in the province in the Q1, partially offsetting restarts in Sichuan and other provinces. In addition, increasing water shortages in Yunnan and Qinghai Present continuing risk of further Chinese output cuts in 2023.

Speaker 2

These supply side headwinds continue to reduce global inventories, which are now below 50 days of global consumption. With inventories at these historically low levels, LME prices and regional premiums In Q1, the 3 month aluminum price averaged $2,438 per tonne, up nearly $100 from Q4 levels. Regional delivery premiums witnessed quarter over quarter improvements as well, propelled by better than anticipated demand and low inventories. U. S.

Speaker 2

Premiums have recently receded slightly, but remain elevated, While EDPP strengthened throughout the quarter given EU supply curtailments. As discussed in our previous call, billet demand was muted during Q1 in the U. S. And Europe, with the market seeing a gradual recovery in demand after January As customers have largely concluded destocking and tight secondary margins support the market. Building and construction demand was the most challenged of our markets in the Q1, likely dampened by rising interest rates.

Speaker 2

Automotive and Renewable Energy Markets, on the other hand, experienced the strongest demand improvements As automotive supply chain issues were alleviated and increasing government support for renewable energy projects started to boost the sector. Despite this recent weakness, we continue to anticipate very constructive long term billet and slab demand growth in both the U. S. And Europe, driven by the global macro trends towards sustainability, lightweighting and electrification. Automotive demand will benefit from all three trends As aluminum content per vehicle has steadily increased in order to meet the industry and regulators' requirements for fuel efficiency, Lower emissions and increased production of electric vehicles.

Speaker 2

For example, the U. S. EPA's announcement last month proposing new emissions reduction requirements that would be measured on a total fleet basis will require significant EV conversion, with the EPA estimating that more than 2 thirds Of all light vehicles produced 2,032 needing to be electric vehicles in order to meet the standard. The automotive industry continues to turn towards high performance aluminum alloys and advanced extruded and rolled solutions in place of heavier traditionally steel components, Driving long term billet and slab demand. Turning to the cost side, U.

Speaker 2

S. Energy prices returned to normalized levels in Q1 With IndiHub averaging around $33 per megawatt hour, a nearly 50% reduction over Q4. U. S. Energy supply and demand fundamentals remain constructive, with natural gas reserves sitting 35% above year ago levels and utility coal stockpiles 28% above year ago levels.

Speaker 2

Aluminum prices did rise during the quarter, Prices have been supported by alumina production curtailments in Australia due to a natural gas supply shortage and bauxite mine permitting challenges. I'll return to Illumina at the end of the call when I discuss our Jamalco acquisition after Jerry walks you through the quarter and our Q2 outlook. Jerry?

Speaker 3

Thank you, Jesse. Let's turn to Slide 6 and I'll walk you through the results for the Q1. On a consolidated basis, Q1 global shipments were 181,000 tons supported by higher plant utilization levels and sell through of finished goods. Realized metal prices improved to help deliver net sales for the quarter of $552,000,000 a 4% increase sequentially. Looking at Q1 operating results, adjusted EBITDA was $24,000,000 an improvement of $36,000,000 sequentially.

Speaker 3

Adjusted net loss was $11,300,000 or $0.11 per share. This was an improvement of $20,000,000 compared with prior quarter. In Q1, the major adjusting items were $47,800,000 for the unrealized impacts of forward contracts, partially offset by $25,600,000 For lower cost or net realizable value on inventory and $5,400,000 of capacity charges due to the curtailment of Hawesville, the latter of which will reduce to 0 by the end of this month. Liquidity remained strong at $241,000,000 at the end of the quarter, consisting of $30,000,000 in cash and $211,000,000 available on our credit facilities. Turning to Slide 7 to further explain the $36,000,000 sequential improvement in adjusted EBITDA.

Speaker 3

Realized lagged LME prices were slightly better than anticipated in the outlook we provided during our last call. First quarter realized LME was $2,350 per ton, up $42 versus prior quarter, While realized U. S. Midwest premiums of $5.73 per ton were up $104 Realized European delivery premiums of $2.90 per ton were down $209 reflecting a full 3 month lag. Together, these factors contributed a $3,000,000 benefit in the quarter.

Speaker 3

Realized alumina cost was $3.90 per tonne, $10 lower on a sequential basis. Realized coke prices decreased 5%, while realized pitch prices increased 10%, in line with expectations. Together, alumina and other raw material costs contributed $7,000,000 to EBITDA. Power cost nearly halved from prior quarter for our MISO Indiana hub exposure as well as a 34% reduction in Nord Pool market prices, Adding $35,000,000 of incremental EBITDA, slightly better than expectations. Finally, sales mix was unfavorable, resulting from the customers destocking that Jesse referenced and that we had forecasted on our last call.

Speaker 3

In total, adjusted EBITDA for the Q1 was $24,000,000 a $36,000,000 improvement sequentially. Now let's turn to Slide 8 for a look at cash flow. We started the quarter with $54,000,000 in cash and added $24,000,000 in adjusted EBITDA. Borrowing against our cast outs facility offset $10,000,000 in CapEx for the Grundartangi Cast Outs project. All other CapEx totaled $4,000,000 Hedge settlements contributed $10,000,000 We repaid $19,000,000 on our revolvers and other debt And the Hawesville curtailment power charge was $5,000,000 Working Capital Other used $29,000,000 of cash during the period, about $20,000,000 of which can be explained by normal fluctuations in inventory and accounts payable, leaving us with Q1 ending cash of $30,000,000 Now let's move to Slide 9 for insight into our expectations for the Q2.

Speaker 3

For Q2, the lagged LME of $2,003.80 per tonne is expected to be up about $30 versus Q1 realized prices. The Q2 lagged U. S. Midwest premium is forecast to be $5.70 per tonne, down slightly, And the European delivery premium is expected at $305 per tonne or up about $15 per tonne versus the Q1. Lagged realized alumina is expected to be $400 per tonne, up slightly.

Speaker 3

Taken together, The LME, delivery premium pricing and alumina changes are expected to increase Q2 EBITDA by approximately $5,000,000 versus Q1 levels. Power prices continue to show signs of moderation, and we expect a slight reduction in total energy cost to contribute approximately $5,000,000 of improvement to EBITDA compared with Q1. We expect the impact from Coke and Pitch to be neutral to EBITDA compared with the Q1 as a reduction in coke prices is expected to be offset by stubbornly elevated pitch prices. With respect to Gemalco, we expect a breakeven or better impact to adjusted EBITDA for the Q2. We're excited about future benefits related to increased volume and cost efficiencies and expect Jamalco to be accretive to our financial results at current spot prices beginning in the Q3.

Speaker 3

Jesse will elaborate on this in a moment. OpEx and other costs are expected to increase $5,000,000 to $10,000,000 Due to maintenance cycles, wage inflation and the addition of seasonal labor to maintain smelter stability during the summer months, All factors considered, our outlook for Q2 adjusted EBITDA is expected to be in a range of between $25,000,000 to $30,000,000 Just a few more points to make. From a hedge impact standpoint, we expect a realized gain of between $5,000,000 to $10,000,000 in the second quarter. We expect tax expense of approximately $5,000,000 to $10,000,000 As a reminder, both of these items fall below EBITDA and impact adjusted net income. Finally, I'd like to point out that we do expect to fund between $10,000,000 to $20,000,000 in working capital at Gemaco during Q2 as we continue to ramp up production there.

Speaker 3

With that, I'll turn the call back over to Jesse.

Speaker 2

Thanks, Jerry. Turning to Slide 10, I'll walk you through the key details from our exciting Chamelco acquisition, which closed last week. This transaction is highly for Century as it secures a long term supply of high quality alumina and bauxite for our smelters and achieves increased transparency in our alumina purchases. This will create a more balanced, consistent and robust operational footprint and better position us to deliver strong performance through commodity cycles. Jamalco was originally built by Alcoa and went through a series of major investment and expansion programs in the late 2000s to bring it to its current nameplate capacity of 1,400,000 tonnes.

Speaker 2

The refinery operates as a joint venture with the remaining 45% stake owned by the government of Jamaica through its holding company, Clarendon Alumina Production Limited. We are very pleased to have both as partners at Jamalco. We've long identified Jamalco as a strategic asset for Centuri, given the high quality of its alumina, long term access to domestic bauxite and excellent workforce. Its strategic location in the Atlantic Basin is in close proximity to all of Century's operating locations, providing short and secure supply lines and load logistics costs to each of Century's smelters. Jamalco also has existing mining and exploratory licenses to provide sufficient high quality bauxite for over 30 years of nameplate refinery production, providing a clear runway for long term operations of the refinery.

Speaker 2

Perhaps most importantly, Jamalco has a very experienced and talented workforce that shares Centuri's cultural focus on operating safe and sustainable facilities with 1st class environmental stewardship and community engagement. The refinery has recently been through some difficult times, but it is well on its way to regaining its full potential. In August 2021, a fire broke out in the plant's powerhouse, which halted production of alumina for about a year before it resumed partial operations with only one of its 2 digesters this last summer. Given these challenges, it was very important to us that we have time to conduct thorough due diligence process to ensure the full recovery of the refinery. Due to a unique acquisition structure where we provided interim funding to allow for the restart of the second digester in exchange for an option to purchase a 55 Ownership interest for $1 Centuri teams have been able to conduct extensive due diligence and have an almost continual presence on-site at Gemalco since early February.

Speaker 2

This allowed us to confirm our expectations that despite the 2021 fire, Jamalco retained the potential to return to a second quartile asset. The team at Jamalco has done a fantastic job restarting the 2nd digester, with the plant now running near an annualized production rate of 1,200,000 tonnes. We expect production to continue to increase and exceed 1,200,000 tonnes over the next several months. The additional volume and efficiency has Already significantly lowered Jamalco's cost structure, and we expect further improvements as the volumes continue to increase. As Gerry mentioned, at current spot prices, we expect Jamalco to be roughly breakeven or better in the Q2 and to be accretive to our financial results Beginning in the Q3.

Speaker 2

Finally, in order to return the asset to its full potential and 1,400,000 tonnes of capacity, We have identified a series of operational improvements and investment opportunities, which we are calling Project Restore, which should return Jamalco to its historical location in the 2nd quartile of the global cost curve and drive further improved profitability. We expect approximately $10,000,000 to $20,000,000 in Project CapEx over the balance of the year, which should begin driving additional cost savings and production increases as soon as Q4 2023. The bulk of the remaining Project Restore investments and volume gains will occur over 2024 to 2026. All Project Restore investments are expected to have double digit unlevered IRRs that meet Century's investment requirements. Will provide you additional detail on the full scope of Project ReStore later this year.

Speaker 2

We are very excited to add Jamalco to the Centuri team and believe strongly that Jamalco will provide Sentry a meaningful opportunity for long term value creation for all of our stakeholders. We look forward to your questions today and we'll turn the call over now to the operator.

Operator

We will now begin the Q and A session. The first question is from the line of Lucas Pipes with B. Riley. You may proceed.

Speaker 4

Thank you very much, operator. Good afternoon, everyone, and congratulations on the announcement And I do have a few more questions on that and thank you for the detail already on the call. But my first question is, Why now? Is there anything that has changed in your view of the strategic landscape that makes vertical integration more attractive today than maybe in the past. Thank you very much.

Speaker 2

Thanks, Lucas. It's Jesse. This is something that we've been looking at and talking about for quite a while now and being Backward integration up into the alumina and bauxite supply chain. And But we've been patient and waiting for the right opportunity to arise. In Jamelco, we found an asset that we knew well.

Speaker 2

As I mentioned, we've Long been the largest customer there, and we're very familiar with the high quality of the alumina that they produce. Also fits well within our footprint. So we can take and have taken Jamelco Alumina to all of our operating smelters, Works well in all of them. And we also found an asset that has high potential. We know it has long operated in the 2nd quartile and had sort of an exogenous event that created a hard times.

Speaker 2

But given the sort of unique acquisition We're able to set up here. We're really able to get our arms around the asset. Feel very confident that we can put it back into the 2nd quartile. And then ultimately just derisk Century from another exogenous risk of high aluminum prices over the long term. So it fits with what we've always said on M and A that we'd like to find assets that fit those factors.

Speaker 2

And we'll also be opportunistic and look for the right opportunity. And for those reasons, we felt like this was the right time at Chemeketa.

Speaker 4

Very helpful. Thank you for that. And my follow-up question is On some of the points you just raised, putting the asset back into the 2nd quarter, could you Comment on what sort of capital may still be necessary in addition to what you outlined for the 2nd quarter, I think that's $20,000,000 to $30,000,000 of working capital. And then more broadly, you mentioned that The asset will be accretive to your financial metrics. I think you said Q3.

Speaker 4

I wondered if you could hone in On what the incremental improvements are that drive that accretion in Q3 versus Q2? Thank you very much.

Speaker 2

Yes, sure. So I'll just start with the second question first and then I'll get to your CapEx question. So most of the beneficial gains will Come in two factors. 1, as we continue to ramp up the volume over the back half, These will occur both from capital projects that we'll implement, but also continued operational improvements that come with the restart of the second digester and the stabilization of operations at the site. And so as we add that volume, along with it will come Lower costs as we spread our fixed costs over that additional volume, but also a variety of operational improvement programs, which will further push the cost down.

Speaker 2

So it's really 2 fold, both Volume and cost savings on the incremental benefits. On the CapEx side, We did mention that we expect about $10,000,000 to $20,000,000 over the back half of this year. Go forward, there will be a number of capital projects remaining for the 2024 to 2026 timeframe, and we'll come back and give you additional guidance there as we go into the back half of the year.

Speaker 4

Got it. I appreciate that color. I'll turn it over for now. Thank you very much.

Speaker 2

Thanks Lucas.

Operator

Thank you. The next question is from the line of Timna Tanners with Wolfe Research. You may proceed.

Speaker 5

Hey, good afternoon.

Speaker 2

Hey, Gemma.

Speaker 5

I wanted to ask about some items I didn't hear you mention. First off, we had In our notes, dollars 28,500,000 from a sale of land from Mt. Holly. So did that is that going to appear in the Q2? Or am I missing something there?

Speaker 2

No. Thanks, Timna. Yes, that transaction continues to move forward. There is A little bit of zoning issues that are going on with the sale, just normal process. And so we now expect that, that will close in the second half.

Speaker 2

But it should be the rest of the metrics for that transaction should be the same.

Speaker 5

Okay. Thanks. Land sale closure second half. And then the other question

Speaker 6

is just going back to Hawesville. I was just

Speaker 5

rereading some of the News and it was late June where you said it was closing for 9 to 12 months and you have some Positive commentary on the market environment and lower Kentucky energy prices. So just wanted updated thoughts on the future of Hawesville.

Speaker 2

Sure. It's a great question. And as we mentioned, when we curtailed it, we did curtail it in a very controlled manner, And we continue to maintain the site as necessary in order to enable a restart. That restart decision obviously is the decision that we'll Look at in the context of the totality of the circumstances. So for Hawesville specifically, we're talking about main drivers being a prolonged period of power prices at historical levels, and then an aluminum price that can maintain levels, to justify the restart expenses required And the cost to and also the cost required to bring that plant back to full capacity.

Speaker 2

So While we have seen conditions improve, we're continuing to wait to see the volatility reduce And both of those components and then ultimately just finding a level that will drive those long term returns that we need to undertake the expense. One item just to note is that on the holding costs there. Sorry, Timna. Just one item to note on the holding costs there. We do expect that the existing power capacity that was purchased last year for the facility, Those costs will not roll off.

Speaker 2

So that's about $2,000,000 a month for a hospital that will roll off.

Speaker 5

Okay. Thanks. So in other words, there's no specific commitment or requirement to restart and you're waiting for In more accommodating power prices and aluminum prices, is that what you're saying?

Speaker 2

That's a good summary, Timna. Yes, it's a holistic decision. We need everything to align. It's something that we'd really like to do, But we just need to wait for the right market conditions in order to move that forward.

Speaker 5

And then if I could just follow-up, and lastly on the last line of questioning around Jamalco. I guess the thing that makes me nervous is whenever you get something For a dollar, you wonder, okay, what's along with that? And so just was there any specific commitment given to the To make in government or anything that we should be aware of in terms of the amount of CapEx, anything else that we should be thinking about in terms of Cash requirements going forward? And thanks again for all the detail.

Speaker 2

No, it's a fair question, Timna. And just as a reminder to start, we did not purchase our 5% interest from the Jamaican government. We purchased it from Noble, who are the former owners. And But the Jamaican government does own the other 45% of the asset. Yes, just to your question about the $1 it was Really unique set of circumstances that enabled this to happen.

Speaker 2

So just give maybe a little bit more color. We've, As you might imagine, as a major customer of the facility, I've been watching the financial situation there closely. And Post fire, they had a difficult period with some long time frames in order to rebuild And as they started to enter into once they restarted it last year in 2022, they started And as you know, with these sorts of assets, it really is important to get them back to full production or to bring the cost structure down. But they found themselves in a situation where they couldn't fund the additional monies that were needed to restart the 2nd digester. And so we worked out a situation where we're able to provide some interim funding.

Speaker 2

But as you might imagine, before we agreed to put the funding in, we wanted to be sure that There was a return there for ourselves since we were able to negotiate this option structure, which gave us a few months to watch the 2nd digester come up and make sure that we're comfortable with the rest of the diligence around the asset And then have the right to exercise that option for $1 And so that's really the sort of reasoning around that dollar structure. And some of that interim funding you'll see that's a part of the $10,000,000 to $20,000,000 that Jerry mentioned that will It came in the form of a prepay for alumina. And so some of that will then be reflected in that $10,000,000 to 20,000,000 And working capital build going forward. But just to your ultimate question, no obligations on the CapEx side, Although we are excited about those projects, we think they're very good projects. And no sort of liabilities assumed, there's no debt on the asset or anything like that.

Speaker 2

So it is what it looks like and we're really excited about the asset.

Speaker 5

Thanks again.

Speaker 2

Yes.

Operator

Thank you. The next question is from the line of John Tumazos with John Tumazos

Speaker 7

Thank you. Staying with Jamalco, Are you going to have any on balance sheet liabilities assumed for reclamation, Post employment costs or other issues, can you give us some guidance as to those amounts?

Speaker 2

Yes. Sure, John. So all of the liabilities assumed are what I would call ordinary course Liabilities for Alumina Refinery. So as you mentioned, there are reclamation liabilities associated with the bauxite mining and ultimately some of the residual storage areas. But the great part about this asset is that it does have significant mine life left.

Speaker 2

So we view it as a very long term asset and has over 30 years of mine life left of high quality bauxite with their existing mining licenses. So we think this is an asset that we will be operating, especially given its place in the 2nd quartile on the cost curve for a very long time.

Speaker 7

The life consolidated liability we see after closing It would be more like $50,000,000 or $100,000,000

Speaker 2

Yes. We'll give you the exact When we come to the back half of the year here after we work through all the accounting, but it's more towards Your first assumption and your latter assumption. Still running through the final accounting on that, but

Speaker 7

Thank you.

Speaker 2

Sorry, John, can you just repeat the question?

Speaker 7

You have the right to buy 100% of the output.

Speaker 2

Now the Jamelco is structured as an unincorporated joint venture where Each of the partners takes their share of the output at cost. And so we take our 55% of the output and CAP takes their 45%.

Speaker 7

Thank you.

Speaker 2

Thanks, John.

Operator

Thank you. The next question is from the line of Katya Yankik with BMO Capital Markets. You may proceed.

Speaker 6

Hi. Thank you for taking my question. Just first for a little bit of clarification. You said the $10,000,000 to $20,000,000 in working capital, that's considered what was prefunding for the 2nd digester? Yes.

Speaker 2

A portion of that was part of a prepayment for Illumina, which will now be delivered And the Q2 and will be part of that $10,000,000 to $20,000,000 in working capital build.

Speaker 6

And how much was the total prefunding? Can you provide that number?

Speaker 2

We're not disclosing that, but it is within the $10,000,000 to $20,000,000 and the rest of that $10,000,000 to 20,000,000 It represents a buildup in inventory payables and receivables as the production has increased at the facility.

Speaker 6

Okay. Then on Slide 17, you typically provide your sensitivities and It's clear that it doesn't include Jamalco, but can you provide any direction as to how the contracts, how the sensitivities, Especially for alumina are going to change going forward?

Speaker 2

Yes. Sure, Katya. No problem. So for Q2, given there's sort of an existing cargo mix and sales coming out of Jamalco, our Internal mix will stay roughly the same as what you see on Page 17. As we integrate and take our share of the Jomalco production Going forward, what you'll see is our mix will change towards roughly half LME linked and half at Jamalco's production cost.

Speaker 2

That sort of our 55% share of Jamalco is about 650,000 tonnes of alumina, which is roughly half of our requirements. So that gives you a sense and we'll give you some additional detail there going forward, but hopefully that roughly balanced half LME percentage, half Jamalco production costs will be pretty close.

Speaker 6

And you can't provide information what the production cost is right now?

Speaker 2

No, we don't break down production costs by an asset by individual asset level, but we will provide some sort of additional input On the Q3 call as to what how Jamalco is integrated into the system, just given that the transaction closed last week, Need a little more time to give the specifics there.

Speaker 6

Okay. Thank you very much.

Speaker 2

Thanks, Katya.

Operator

Thank you. The next question is a follow-up from Lucas with B. Riley. You may proceed.

Speaker 4

Thank you very much. Just a few quick follow ups. First one is on Slide 9. OpEx other Ahead of $10,000,000 to $5,000,000 in Q2. Can you remind us what that headwind is?

Speaker 4

And is it a one off or would it repeat You stay in the segments through the end of the year. Thank you.

Speaker 3

Hey, Luke, it's Jerry. As I said in my Prepared remarks that $5,000,000 to $10,000,000 is made up of Maintenance cycles, we had some wage inflation there and we also had some seasonal labor. If you think back to the Q4 of last year, we did a fair amount of Cost cutting and we've had some efficiencies that flowed through the Q4 into the Q1. We're now approaching a cycle where we're going to invest a little bit of additional OpEx just to help us through the summer months and Manage the seasonality, the difficult timeframe during stability is an important aspect in that timeframe. And so we'll put a little bit of seasonal labor in there as well.

Speaker 4

Got it. So we shouldn't expect a reversal in Q3, but maybe in Q4?

Speaker 3

Correct.

Speaker 4

That's helpful. Thank you. And then Back to Timna's questions on Hawesville, a 2 part question. The first is, What is your sense for restart costs for Haswell? How much capital could be required?

Speaker 4

And then 2nd part, would you hedge possible output with price mechanisms As you did in the past, I think the market was somewhat skeptical of that approach, but would appreciate your thoughts on that matter today. Thank you.

Speaker 2

Thanks, Lucas. Yes, we'll obviously, once we make the decision to restart, We'll give additional detail probably in both those questions at that time. Obviously, both of those are specific to the Exact operating environment that you find yourself in when you make that restart decision. But maybe to give you a little bit of context, when we last restarted Lines at Hawesville back in 2018, you'll remember it was about $25,000,000 per potline that we brought back on. And that If you remember that time, those lines have been down and required full relines of the cells, which is much more capital intensive Then the manner in which it would be restarted this time, because all of those cells were recently relined from the more recent restart, When we restart the next time around, we'll have significantly less realign costs.

Speaker 2

And so I'd expect those restart Costs to be significantly lower than that $25,000,000 per pipeline, but we'll give you additional detail once we actually make the decision.

Operator

Thank you. There are no further questions waiting in queue. I'd like to turn the call back over to Jesse Gary for concluding remarks.

Speaker 2

Thanks everybody for dialing into the call this quarter, and we look forward to talking to you on the 3rd quarter call. Thanks.

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Earnings Conference Call
Century Aluminum Q1 2023
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